Returns per pound of equity.

Return on Equity (ROE) divides net income by shareholders equity. It measures how much profit the business generates for each pound owners have invested. 15-25% is strong; 10-15% is healthy; below 10% is usually weak. Unlike ROA, ROE reflects both operating quality and leverage choices - a highly-leveraged business can show high ROE even with mediocre operating performance.

800k net income on 4M shareholders equity = 20% ROE. Every 1 of invested capital generates 0.20 of profit annually. Sustained 20%+ ROE is a hallmark of quality businesses - network effects, switching costs, brand moats - that protect margins and pricing power over time.

DuPont analysis splits ROE into three drivers: net margin × asset turnover × leverage. A 20% ROE might come from 10% margin × 1x turnover × 2x leverage (typical retailer) or 20% margin × 0.5x turnover × 2x leverage (typical industrial) or 30% margin × 2x turnover × 0.3x leverage (software). Each looks different under the hood but produces the same ROE.

A worked example

Try the defaults: net income of 800,000, shareholders equity of 4,000,000. The tool returns 20.00%. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.

What moves the number most

The result responds to Net Income and Shareholders Equity. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

The formula behind this

ROE = net income ÷ shareholders equity × 100. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.

What to do with a low result

A disappointing result is information, not a judgement. Pick the single input that dragged the figure down most and focus the next quarter on that one factor. Breadth-first improvement rarely works; depth-first on the worst input usually does.

What this doesn't capture

The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.